In Memory Of The Law: The Memory Industry's Legal Problems

A New Investigation and Closing Thoughts

With the total damages levied against the various memory manufacturers in the DRAM case, we would hope and expect that it would discourage any such future foul play - certainly that's much of the reason for the fines in the first place. However, hot on the heels of the DRAM investigation (and a more minor ongoing SRAM investigation) the Justice Department believes it has found new examples of anti-competitive behavior. Many of the players are the same but it's a different market: NAND flash memory.

NAND flash memory (not to be confused with the NOR type) has been a particularly hot industry over the last few years as the capacity for NAND has been growing at a faster rate than any other type of storage, allowing device manufacturers to use NAND on products that previously required other forms of mass storage. Cell phones, MP3 players, PDAs, and even SSD hard drives have made for rapid growth in the NAND flash memory market. Markets ripe for growth however can also be ripe for anti-competitive actions, which is why the Justice Department is taking a look.

Because this investigation is just beginning, the details are relatively sparse compared to what we know about the DRAM case. Many of the companies involved in the DRAM case also make NAND flash memory, and the Justice Department believes they may have been acting in anti-competitive ways similar to what occurred in the DRAM case. The Justice Department has now subpoenaed many of the manufacturers and purchasers of NAND flash memory in order to start building a case; so far everyone subpoenaed has cooperated with the investigation.

Prior to the start of their investigation, the price of NAND had been increasing the past couple of quarters (between 5% and 10% a quarter). Some business analysts and members of the Justice Department find this unusual enough to indicate that something may be amiss. Furthermore, in a separate case that started a month prior to the Justice Department's case, a group of NAND purchasers sued nearly two dozen companies involved in NAND production, accusing them of engaging in price-fixing. Finally, there is concern that the corruption uncovered in the DRAM cartel may have spread into other memory markets.

With that said, at this point it's far too early to make any serious accusations on what is being investigated. The Justice Department started a similar probe of SRAM in 2006 which so far has not turned up anything notable, so it's entirely possible that this is the Justice Department being overly paranoid and there is nothing to find. We have heard rational explanations that would account for the price increases without illegal practices such as price fixing. On the other hand, this is a market that from past experience is clearly vulnerable to collusion, so it's too soon to dismiss any claims about collusion or price fixing until more investigating is done and we have more facts. One thing is certain: if there is something foul going on, you can count on it taking most of the next decade before everything is sorted out.

Closing Thoughts

The fact that we are writing this article is in and of itself an indication of our disappointment with the memory market. Although it's not the end-users that will be seeing the restitution from the DRAM case, it was ultimately the end-users who paid the extra cost. In colluding to raise prices, the DRAM cartel has effectively ripped off virtually every one of us. Even though "justice" has been done, few of those who were truly wronged will be getting restitution for what has happened.

There's a fundamental belief in the market that if prices are high, there is a good reason for it. Perhaps something costs a lot to make, there's little supply, or someone along the way was smart enough to build a better product and command a premium for what they can offer. However, even in the cold hard world of capitalism there's a certain breach of trust when the participants in the market are colluding to rip the consumer off, and that has happened at least once.

This article is admittedly late. What's done is done and other than the class action suit the rest of the punishment has been served and most everyone has moved on. At the same time, the computing industry in spite of its size has a very small feeling much of the time; this is what drives things such as brand loyalty and fanboyism for companies and products. It's an unusual but functional relationship that keeps things going, but situations like this sour that relationship. The computing industry already has its villains; do we really need more of them?

At this point we're waiting for the result of the Justice Department's investigation into the possibility of similar price fixing for NAND flash memory; we hope these accusations aren't true, but it's far too early to know the truth. For this kind of problem to occur once, it's a disappointment but redemption is a possibility. For it to occur again may very well mean constant suspicion of bad behavior and overcharging will be the new modus operandi for the memory buyer. We would much rather have heroes to praise than villains to fear and avoid.